NORWEGIAN AIR SHUTTLE ASA THIRD QUARTER REPORT 2008 HIGHLIGHTS Third quarter revenue up by 48.9 % to MNOK 1,971.9 (1,323.9). The Group earnings before depreciation (EBITDA) in third quarter were MNOK 228.5 (168.2). Ancillary passenger revenue up 87 % in third quarter. MNOK 388 in non cash financial income. Net result before tax was MNOK 581.7 (105.8). Unit cost (excluding fuel, and Norwegian.se) down by 16% compared to last year. Declining fuel prices during third quarter, actual price pr tonne this quarter USD 1.271 (698). Unit fuel cost up 49% compared to last year. The company completed a share issue of MNOK 400 partly to cover the Group’s equity share for the 10 first 737-800 aircraft. PDP financing for the 10 first 737-800 was finalised and had a cash effect of MNOK 235.4 in third quarter. KEY FINANCIAL FIGURES Consolidated Financial Key figures and ratios Unaudited Year ended Dec 31 (NOK 1 000) 2008 2007 2008 2007 2007 Operating revenue 1 971 859 1 323 902 4 611 666 3 080 813 4 226 202 EBITDAR 321 449 265 316 244 812 474 776 504 395 EBITDA 228 482 168 210 -39 425 244 299 207 995 EBIT 193 378 149 194 -138 963 191 670 133 951 Net profit/ loss (-) 414 428 76 289 141 494 106 048 84 580 EBITDAR margin 16.3 % 20.0 % 5.3 % 15.4 % 11.9 % EBITDA margin 11.6 % 12.7 % -0.9 % 7.9 % 4.9 % EBIT margin 9.8 % 11.3 % -3.0 % 6.2 % 3.2 % Net profit margin 21.0 % 5.8 % 3.1 % 3.4 % 2.0 % YTD Sept 30 Quarter ended Sept 30 TRAFFIC FIGURES AND RATIOS Unaudited Year ended Dec 31 (NOK 1 000) 2008 2007 2008 2007 2007 Yield (NOK) *) 0.66 0.62 0.63 0.66 0.65 Unit Revenue (NOK) *) 0.54 0.53 0.50 0.53 0.52 Unit Cost (NOK) *) 0.50 0.50 0.54 0.52 0.53 Unit Cost ex. fuel (NOK) *) 0.31 0.37 0.36 0.40 0.40 Ancillary revenue/PAX (NOK) *) 61.6 32.9 53.7 28.9 33.3 Norwegian.no ASK (mill) 2 765 2 042 6 991 5 147 6 959 Passengers 2 100 400 1 794 332 5 623 214 4 692 660 6 362 725 Load factor 81 % 87 % 79 % 81 % 80 % Norwegian.se ASK (mill) 824 1 755 796 Passengers 473 982 1 292 422 693 867 Load factor 84 % 80 % 82 % YTD Sept 30 Quarter ended Sept 30 *) Only Norwegian Air Shuttle ASA, excluding Nodic Airlink Holding AB (Norwegian.se)
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NORWEGIAN AIR SHUTTLE ASA THIRD QUARTER REPORT · 2015. 6. 29. · NORWEGIAN AIR SHUTTLE ASA THIRD QUARTER REPORT 2008 HIGHLIGHTS Third quarter revenue up by 48.9 % to MNOK 1,971.9
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NORWEGIAN AIR SHUTTLE ASA
THIRD QUARTER REPORT 2008
HIGHLIGHTS
� Third quarter revenue up by 48.9 % to MNOK 1,971.9 (1,323.9). � The Group earnings before depreciation (EBITDA) in third quarter were MNOK 228.5 (168.2). � Ancillary passenger revenue up 87 % in third quarter. � MNOK 388 in non cash financial income. � Net result before tax was MNOK 581.7 (105.8).
� Unit cost (excluding fuel, and Norwegian.se) down by 16% compared to last year. � Declining fuel prices during third quarter, actual price pr tonne this quarter USD 1.271 (698).
Unit fuel cost up 49% compared to last year.
� The company completed a share issue of MNOK 400 partly to cover the Group’s equity share for the 10 first 737-800 aircraft.
� PDP financing for the 10 first 737-800 was finalised and had a cash effect of MNOK 235.4 in
third quarter.
KEY FINANCIAL FIGURES
Consolidated Financial Key figures and ratiosUnaudited Year ended
A total of 2,574,382 passengers travelled with Norwegian (the Group) in the third quarter of 2008, compared to 2,033,418 in the third quarter of 2007, equivalent to an increase of 27 % in the number of passengers. Norwegian.no had a passenger load factor of 81 % this quarter, compared to 87 % in the same period in 2007. The production (ASK) has increased by a total of 35 % for Norwegian.no, and the passenger traffic (RPK) has increased by 27 %. Norwegian.se had a passenger load factor of 84 %.
At the end of the third quarter 2008 Norwegian had 39 operational aircraft, compared to 29 at the end of the same period last year (incl. wet lease). The total fleet including aircraft on maintenance and excluding wet lease was 42 aircraft on the same date. The Group utilized every operational aircraft 11.0 block hours compared to 10.7 last year. Norwegian.no utilized every operational aircraft 11.3 block hours pr day in the third quarter, a 1% increase compared to the same period last year. Norwegian.se utilized every operational aircraft 9.8 block hours which is an increase of 26% compared to last year. The utilization of the aircraft has improved as a consequence of the expansion, longer flying distances and for Norwegian.se restructuring and optimization of the route portfolio.
The share of Internet sales was 89 % for Norwegian.no which is equivalent to the same period last year. For Norwegian.se 91 % of sales was internet based which is an increase of 2 p.p.
Total revenue in third quarter was MNOK 1,971.9 (1,323.9), an increase of 48.9 %. MNOK 1,811.0 (1,245.0) of the revenues in the third quarter is related to ticket revenues. MNOK 144.7 (59.0) is other passenger related revenue, while the remaining MNOK 16.0 (19.9) is related to freight, third-party products, and other income. The yield for Norwegian in third quarter (excluding Norwegian.se) was NOK 0.66 compared to NOK 0.62 same period last year. The increase in yield is mainly due to the introduction of fuel surcharges in second quarter 2008. Ancillary passenger revenue was NOK 61.6/PAX (32.9) in third quarter 2008, an increase from same period last year of 87 % mainly due to the introduction of seating and baggage fees in 2007. Operating Expenses
The operating expenses excluding leasing and depreciation were MNOK 1,650.4 (1.058.6) this quarter up 55.9 % from same period last year. The increase in operating expenses is mainly related to increases in production (ASK) and increase in fuel cost. Furthermore a cost of MNOK 14.3 related to wet-leases has reduced earnings as one of the Group’s 737-300 deliveries have been delayed entering into service. Throughout third quarter the Group’s operations has been challenged by a fuel price that compared to last years price level, has caused an added fuel expense of MNOK 220 for third quarter. The average cost pr tonne fuel in third quarter was USD 1271, compared to USD 698 in the third quarter 2007. The Group has at the end of the third quarter, forward contracts to cover approx 21% of fuel exposure for 2008. Term contracts on USD cover approximately 29 % of expected exposure for operating activities in USD until December 2008. Term contracts on EUR cover approximately 15 % of expected exposure in EUR until December 2008. Changes in fair value of foreign currency term contracts are included in operating costs, in the operating expense line item the hedge is designed to secure. Total expense in third quarter was MNOK -33.9 (cost reduction). In addition, the Group purchased in December 2007, term contracts on USD to minimize the USD exposure on the purchase of three used Boeing 737-300. The last one of these three aircraft was delivered in third quarter. Changes in fair value on these contracts are booked as other costs in the profit and loss, amounting to an expense of MNOK -10.2 in third quarter (cost reduction. The increase in depreciation and amortization is mainly due to new aircraft and amortization of fair value adjustments of assets in Norwegian.se (Nordic Airlink Holding AB). Profit/loss from associated company in third quarter of MNOK -2.2 (0.0) consists of the Group’s estimate on the 20 % share of Bank Norwegian’s third quarter results. Earnings
Earnings before depreciation and write-down (EBITDA) in the third quarter were MNOK 228.5 (168.2), and the earnings before tax (EBT) were MNOK 581.7 (105.8). Financial items
Financial items in third quarter of MNOK 390.5 (-43.4) include an income of MNOK 387.8 for the hedge contract connected to the purchase contract for new generation Boeing aircraft. Due to recent developments in foreign exchange rates, the hedge instrument has in its entirety become inefficient as defined by IFRS 39 by the end of Q3 08. The company has restructured the hedge instrument into term contracts and options. The term contracts and the options are as of the end of third quarter separated allowing for hedge accounting for the term contracts and fair value accounting for the options. The above mentioned effects are a
Norwegian Air Shuttle ASA Third Quarter Report 2008
result of IFRS accounting principles, and have during this period no effect on cash-flows, exposure to exchange rate risk or the underlying performance of the company. As of 16 October Norwegian sold its USD hedge contracts resulting in a positive cash effect of MNOK 324. The sale of the term contracts will have no effect in the company’s income statement in the fourth quarter, but will have balance sheet and cash flow effects. Calculated interest income of MNOK 7.3 on prepayment on the purchase contract for 42 new aircraft is included in financial items. Tax The companies in the Group have tax losses to be carried forward both in Norway and Sweden. A reduction of deferred tax asset of MNOK 116.8 was recognized in third quarter. Deferred tax liability increased by MNOK 43.3 during third quarter. In relation to the share issue MNOK 6.7 in deferred tax income was booked directly to equity. Net result Net result for third quarter of 2008 was MNOK 414.4, compared to MNOK 76.3 in third quarter 2007. Balance sheet
Total non-current assets amounted to MNOK 1,694.2 at the end of the quarter compared to 1,068.4 at year end. Included in tangible fixed assets are the prepayments to Boeing on 42 new aircraft of MNOK 554.4, compared to 316.5 at year end, and fair value of hedge object related to the hedge contract of MNOK 214.4 up from MNOK 128.0 at year end. One new aircraft has been capitalised during third quarter of 2008 increasing book value of aircraft up to MNOK 449.3 compared to MNOK 151.4 at year end. Compared to year end, deferred tax asset has been reduced by MNOK 18.2 to MNOK 43.1. Total liabilities at the end of the quarter were MNOK 2,187.4 (1,961.8), of which MNOK 535.4 is interest bearing. Traffic liability was MNOK 682.3 in the end of third quarter up from MNOK 536.5 at year end. Due to seasonality traffic liability is reduced by MNOK 411.0 during third quarter. Shares
The parent company Norwegian Air Shuttle ASA had a total of 32,359,778 shares outstanding at the end of third quarter, compared to 20,865,526 shares outstanding at the end of 2007. During third quarter Norwegian introduced a voluntary share option program for all its employees. If all options are exercised the maximums shares to be issues within October 2010 are 561.301. Cash flow
Cash and cash equivalents balance at end of third quarter was MNOK 478.4 compared to MNOK 501.4 at year end. Operating activities Cash flow in third quarter from operating activities amounted to MNOK -312.0, compared to MNOK -68.1 in third quarter last year. The reduction in traffic liability is the factor contributing most to the negative cash flow. Investment activities Cash flow spent on the investment activity in the third quarter was MNOK -248.1. One new aircraft and upgrade on existing aircraft of MNOK 117.3 and as well as prepayments on the Boeing contract of MNOK 121.6 are the main investments in the quarter. Financing activities Net cash flow from financing activities in the third quarter was MNOK 604.8. Pre-Delivery-Payment (PDP) financing for the 10 first 737-800 was released during third quarter with a cash effect of MNOK 235.4. The financing covers the prepayment stream on the first batch of 10 aircraft. In addition, the company completed a rights issue of MNOK 400 in order to finance the Group’s equity share of the above mentioned aircraft.
Norwegian Air Shuttle ASA Third Quarter Report 2008
Significant Risk and uncertainties The airline industry is undergoing a challenging time as a consequence of high fuel costs and the general financial situation, which has increased the risk in the industry. Of material developments for the company last year, it should be noted that Norwegian’s guided capacity growth is 50 % for 2008 and has taken deliveries of the first six of 53 aircraft of the type 737-800 NG the company ordered last year (last delivery in 2014), the on going integration of Norwegian.se (Nordic Airlink Holding AB) which was acquired from Finnair in 2007 and the launch of a new base at Rygge Airport. Outlook The demand for travelling with Norwegian and advanced bookings has been satisfactory entering the fourth quarter of 2008. Norwegian has executed several sales and marketing campaigns that have been well received by the market, and continue to attract customers to the continuously growing route portfolio. The demand for tickets has so far not been affected by the turmoil in the global financial markets. However future demand is dependant of sustained consumer and business confidence in our key Scandinavian markets. The Swedish operation will continue to focus on the restructuring and optimizing efforts. These plans include further adjustment of the route portfolio, adjusting the aircraft fleet, reducing the number of staff and realizing synergies within the Group. The Polish operation is expected to develop satisfactory The Group guided at the second quarter presentation a unit cost of NOK 0,55 for 2008 assuming a fuel price of USD 1400 pr ton and the then existing route network. During the third quarter the fuel price has decreased. With the current jet fuel price, USD/NOK exchange rate and route portfolio, the Group anticipates a unit cost in the area of 0,54 for the full year 2008. Interim report Q4 2008
The interim report for forth quarter 2008 will be presented 12 February 2009.
Fornebu, 22 October 2008 Bjørn Kjos CEO
Norwegian Air Shuttle ASA Third Quarter Report 2008
Equity - Beginning of period 508 273 260 727 260 727
Share issue 382 720 127 002 136 463
Equity change on employee options 3 725 686 1 558
Stock options issued for FlyNordic aquisition 29 485 29 485
Profit/loss 141 494 106 048 84 580
Exchange rate difference group 1 828 -7 556 -4 540
Equity - End of period 1 038 040 516 392 508 273
YTD Sept 30
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS General and accounting principles
Norwegian Air Shuttle ASA (the Group) consists of Norwegian Air Shuttle ASA and its subsidiaries. The company is a limited company incorporated in Norway. The condensed consolidated interim financial statements comprise the Group. The consolidated financial statements of the Group for the year ended 31. December 2007 is available upon request from the company’s registered office at Oksenøyveien 10A, 1330 Fornebu, Norway, or at www.norwegian.no. These condensed consolidated interim financial statements have been prepared in accordance with rules and regulations of Oslo Stock Exchange and International Financial Reporting Standard (IAS) 34 Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements, and should be read in conjunction with consolidated financial statements of the Group as at and for the year ended 31 December 2007. These condensed interim financial statements are unaudited. The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007.
Note 1 Judgements, estimated and assumptions
The preparation of condensed consolidated interim financial statements in accordance with IFRS and applying the chosen accounting policies requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the period ended 31 December 2007.
Norwegian Air Shuttle ASA Third Quarter Report 2008
SENSITIVITY ANALYSIS Effect on incomeUnaudited MNOK
1 % decrease in jet fuel price 151 % weakening of NOK against USD -291 % weakening of NOK against EUR -10
The sensitivity analysis reflects the effect on P/L by substantial changes in market prices and exchange rates. The effect on P/L is annualized based on today's level of production, fuel prices and exchange rates. Operational hedges are not included in the calculation of the sensitivity.
Note 3 Revenue
In First quarter the Group reclassified line items of revenue between passenger revenue, ancillary passenger revenue and other revenue. Passenger revenue comprise only ticket revenue, while ancillary passenger revenue is other passenger related revenue such as fees. Other revenue consist of revenue not directly related to passengers such as cargo, 3rd party commissions etc. SALES REVENUEUnaudited
Note 5 Segment information The Group’s business is managed in one operational segment which is low cost air passenger travel. The products are in all effect identical in all geographical markets. The Group has operations in three geographical areas, but the revenue generating assets, the aircraft, are utilized separately between Norway and Sweden. Because the Group only has one business segment, the primary reporting format is the geographical segments. There have been no changes from the last annual financial statements in the basis of segmentation or in the basis of measurement of segment profit or loss. SEGMENTSUnaudited
(NOK 1 000) Norway Sweden Total Norway Sweden Total
*) Includes depreciation and write down on the fair values of assets identified in purchase price allocation. Write down on fair value of brand name FlyNordic is MNOK 19.6.
Note 6 Information on related parties
During third quarter 2008 there are no change in related parties compared to described in Note 27 in the annual report. There have been no significant transactions with related parties during third quarter 2008.
Definitions ASK: Available Seat Kilometres. Number of available passenger seats multiplied by the flight distance. RPK: Revenue Passenger Kilometres. Number of sold seats multiplied by flight distance. CABIN FACTOR: Relationship between RPK and ASK as a percentage. Describes the rate of utilisation of available seats. EBITDA: Operating profit/loss before financial items, taxes and depreciation EBITDAR: Operating profit/loss before financial items, taxes, depreciation and leasing costs for aircraft
Norwegian Air Shuttle ASA Third Quarter Report 2008
Mailing address No – 1330 Fornebu Visiting address Oksenøyveien 10A Telephone +47 67 59 30 00 Internet www.Norwegian.no Organisation Number NO 965 920 358 MVA
Board of Directors in Norwegian Air Shuttle ASA
Erik G. Braathen, chairman Bjørn H. Kise, deputy chairman Ola Krohn-Fagervoll Liv Berstad Marianne Wergeland Jenssen Monika Johansen Halvor Vatnar Sissel Vårum